6 Investing Rules Every Investor Needs to Know

1. Rule of 72: How Long to Double Your Money

What It Is: This rule helps you figure out how many years it’ll take for your money to double at a fixed interest rate. You divide 72 by the annual interest rate, and voilà—you’ve got your answer.

Purpose: It’s a quick way to see how your investments can grow over time.

Formula: 72 ÷ Interest Rate

Example: If Apple stock is growing at 10% annually, it’ll double in 72 ÷ 10 = 7.2 years.

Let’s say you invest $5,000 in a savings account or stock that earns 8% interest each year. Using the Rule of 72, 72 ÷ 8 = 9 years. So, in about 9 years, your $5,000 could grow to $10,000—pretty cool, right? This rule is great for planning long-term goals, like saving for a house or retirement.

2. Rule of 114: How Long to Triple Your Money

What It Is: Similar to the Rule of 72, this one tells you how long it’ll take for your money to triple. Divide 114 by the annual interest rate.

Purpose: It’s another tool to predict growth, but for tripling your investment.

Formula: 114 ÷ Interest Rate

Example: If Microsoft stock grows at 12% annually, it’ll triple in 114 ÷ 12 = 9.5 years.

Imagine you put $3,000 into a mutual fund with a steady 6% return. Using the Rule of 114, 114 ÷ 6 = 19 years. So, in 19 years, your $3,000 could become $9,000. This is perfect for thinking about bigger goals, like funding your child’s college education.

3. Rule of 144: How Long to Quadruple Your Money

What It Is: This rule shows how long it’ll take for your money to quadruple. Divide 144 by the annual interest rate.

Purpose: It helps you plan for even larger growth over time.

Formula: 144 ÷ Interest Rate

Example: If Meta grows at a rate of 6% annually, it’ll quadruple in 144 ÷ 6 = 24 years.

Let’s say you invest $2,000 in a diversified portfolio earning 4% annually. Using the Rule of 144, 144 ÷ 4 = 36 years. In 36 years, your $2,000 could turn into $8,000. This rule is great for long-term retirement planning, especially if you’re starting young.

4. Rule of 70: How Inflation Eats Your Buying Power

What It Is: This rule tells you how long it’ll take for inflation to cut your money’s buying power in half. Divide 70 by the annual inflation rate.

Purpose: It highlights how inflation can erode your savings over time.

Formula: 70 ÷ Inflation Rate

Example: With an annual inflation rate of 3%, it’ll take 70 ÷ 3 = 23.3 years for your money’s buying power to halve.

Here’s a real-life example: If you have $10,000 today and inflation is 3% per year, in about 23 years, that $10,000 will only buy what $5,000 buys today—think about how much more expensive groceries or rent might be in two decades! This rule reminds us to invest wisely to outpace inflation.

5. The 110 Rule: Smart Asset Allocation

What It Is: Subtract your age from 110 to determine what percentage of your portfolio should be in stocks, with the rest in bonds or safer investments.

Purpose: It helps balance risk and safety based on your age.

Formula: 110 – Your Age

Example: If you’re 40 years old, you should have 70% of your portfolio in stocks (110 – 40 = 70) and 30% in bonds.

Let’s say you’re 30 years old with a $100,000 portfolio. Using the 110 Rule, 110 – 30 = 80, so you’d put 80% ($80,000) in stocks and 20% ($20,000) in bonds. As you get older, say to 50, it’d shift to 60% stocks and 40% bonds (110 – 50 = 60). This rule keeps your investments aligned with your life stage and risk tolerance.

6. The 3-6 Rule: Building an Emergency Fund

What It Is: Save 3 to 6 months’ worth of your expenses as an emergency fund.

Purpose: It ensures you have a financial safety net for unexpected events like job loss or medical bills.

Formula: Save 3–6 months of expenses

Example: If your monthly expenses are $2,000, you should save between $6,000 and $12,000 as an emergency fund.

Imagine your monthly bills—rent, groceries, utilities—add up to $3,000. Using the 3-6 Rule, you’d aim to save $9,000 to $18,000 in a separate savings account. This fund can save you from dipping into investments or racking up debt if, say, your car breaks down or you face a sudden layoff.